Questions Predominate in HTSUS Classification

Value Vinyls, Inc. is an interesting classification case in that it all turns on the meaning of one word. As Groucho might say, it's a simple word you hear every day (well maybe not every day). The word in question is "predominate." Specifically, item 3921.90.11 of the Harmonized Tariff Schedule of the United states covers products "with textile components in which man-made fibers predominate by weight over any other single textile fiber." The problem for the Court of Appeals for the Federal Circuit is that the merchandise contains only man-made fibers.

Can man-made fibers predominate in a sea of man-made fibers? Is there a majority where there is no minority?

A split Federal Circuit held that there is. The Court focused much of its attention on the conversion from the old TSUS to the current HTSUS. Apparently, the corresponding TSUS provision (355.81) included products made wholly of man-made fibers. The TSUS provision covered articles that were "wholly or in chief value" of man-made fibers. Because the TSUS language expressly covered products wholly of artificial fibers, the corresponding HTSUS language requiring that "man-made fibers predominate" should have the same meaning absent express Congressional intent to the contrary. Given that the transition from the TSUS to the HTSUS was supposed to be revenue neutral, the CAFC affirmed the CIT and said that a material that is wholly of man-made fibers is also predominately of man-made fibers.

To get to that conclusion, the Federal Circuit had to discuss an older Court of Intrernational Trade Case called Semperit Indistrial Products (1994). Semperit dealt with similar language in 4010.91.15 relating to conveyor belting. In Semperit, Judge Carman said "defendant's contention that the subheading's provisions for 'situations where other textile fibers may be present with man-made fibers does not mean that articles in which only man-made fibers are present are precluded' fails to embrace the comparison implicit in the term 'predominate' between two or more parts." The CIT concluded that the plain meaning of predominate required two or more materials for comparison.

No judge of the Court of International Trade is bound by a decision of another judge. Also, a CIT decision does not bind the Court of Appeals. So, there is nothing wrong with the result in Value Vinyls. Reasonable minds can disagree.

Which brings me to the reasonable mind of one Robert W. Gettleman, U.S. District Judge of my own Northern District of Illinois. He sat by designation on this case and filed a dissent. First, I need to say to Judge Gettleman, welcome to my world. I bet your clerks were not too excited about having to wade through not just the HTSUS but also the TSUS and the conversion documents.

Judge Gettleman appears to have come at the decision with something of an outsider's perspective. He seemed less concerned with the conversion from the the TSUS to the HTSUS or with rate neutrality. He focused on the language in the disputed provision. Specifically, he wrote that "The plain meaning of 'predominate' is unambiguous. It necessarily 'contemplates a hierarchy between two or more elements' and 'incorporates a comparison between two or more entities and a determination that one of the entities outweighs the other.'" The internal quotations come from Judge Carman in Semperit. He went on to note that "The change in language from 'wholly or in chief value' in the TSUS, to 'predominate by weight' in the HTSUS evidences intent by Congress to change the meaning of the subheadings, not just the method of measuring the goods as the majority suggests."

This is one of those cases in which reasonable people can come to reasonable but inconsistent conclusions. Personally, I'm not confident that the sentence, "Bowling balls are the balls used predominately in bowling," makes a lot of sense. What I mean is "Bowling balls are the only balls used in bowling." [Note to family in New England: Candlepin is still bowling and the balls are still bowling balls. Also, my grandfather is in the Hall of Fame. How about that?] But from a legal standpoint, there is a real question as to what Congress intended.

So what are importers to do? The practical effect of the CAFC decision may be to effectively overrule Semperit even though the Court distinguished, rather than overruled it. Importers looking for clarity and predictability will look to the Court of Appeals for guidance. However, Judge Carman's decision in Semperit remains in place. So, if your issue is four-square covered by Semperit, think hard about standing your ground. What is left of Semperit is an issue for reasonable minds to sort out in a later case.

Comments

Post a Comment

Popular posts from this blog

Ruling of the Week 2015.8: Old Jersey and Pitcairn Island

Image
For today's ROTW, I set out looking for a ruling dealing with some far off and preferably warm location. Turns out that, with the exception of coastwise transit issues, there are no Customs and Border Protection rulings involving Pitcairn Island or any of several Pacific Ocean microstates including Tuvalu , Niue , and Kiribati . Pitcairn Island What I did find is an interesting question about the country of origin marking for products of the Bailiwick of Jersey Island, Channel Islands. The ruling is HQ 561938 (Mar. 18, 2002). For those of you who may not know, Jersey is an island off the coast of Normandy, France. It is an independent international actor and not part of the U.K. although the U.K. is responsible for its defense and external relations. Also, the Queen is the Head of State in her capacity as "the Crown in Right of Jersey." It is, according to the U.S. Department of State, a " Crown Dependency " along with the Isle of Man and the Bailiwick o...
Read more

CAFC Decision in Double Invoicing Case

The Federal Circuit has issued a decision on the merits in United States v. Inn Foods, Inc.  There had been a previous decision on jurisdiction, which was followed by a trial at the Court of International Trade and then this appeal on the substance. The initial issue is whether Inn Foods' invoicing practice amounts to fraud.  Inn Foods had been receiving an invoice from growers in Mexico that had a relatively low sales prices on it.  Subsequent to entry, Inn Foods created a second invoice at something more similar to market value, retaining the original invoice number, and paid at that higher amount.   Superficially, this looks like a standard-issue double-invoicing scheme.  But, in the age of reconciliation, is it really more like a provisional pricing mechanism?  It might have been possible to make that argument had Inn Foods adjusted its entries accordingly.  It didn't and the loss of revenue was approximately $624,000.  Based on testimony and evidence indicating both knowl...
Read more

Ninestar and UFLPA Exhaustion

Image
Exhaustion is a key doctrine in administrative law. When applicable, it requires that a party unhappy with an agency’s determination complete the administrative appeal process before turning to the courts for judicial review. Requiring exhaustion typically promotes judicial efficiency by ensuring that disputes are resolved at the agency and, if they are not, that there is a complete record of the agency process. Exhaustion also ensures that the judiciary respects the executive agencies and their expertise.  There are, on the other hand, times when the courts will find that exhaustion is not necessary or appropriate. Such is the case in  Ninestar Corporation et al. v. United States  et al., a decision of the U.S. Court of International Trade.  Ninestar is also interesting because it is one of the first cases in the CIT involving the Uyghur Forced Labor Prevention Act, known as UFLPA. In my hiatus from active blogging, I missed the rise of UFLPA as a major compliance t...
Read more